The Good, The Bad and The Ugly



Your home may be repossessed if you do not keep up repayments on your mortgage.

 

Re-mortgaging is where you take out a new mortgage on your property to replace the one you already have. There are many reasons people choose to re-mortgage, but we thought we’d look at when it’s a good time to do it and when it’s not.

 

Good time

The fixed rate deal you are on is about to end

Usually the fixed rate mortgage deals only last for between two to five years. When this ends your lender will put you on its standard variable rate (SVR). This rate will be higher than what you were paying before, so it makes sense to re-mortgage to a better rate. However, you should start looking at least 12 weeks before your current fixed rate deal ends.

 

The value of your home has risen a lot

If the value of your home has increased a lot since you took out your mortgage you could find you are in a lower LTV band (loan to value). This could mean you will have access to much lower interest rates so is worth taking a look at.

 

You need to raise a large sum of money

Whilst re-mortgaging with a new lender may enable you to raise money on low rates, don’t forget to include all the fees when doing the calculations to ensure it really is cheaper than other types of borrowing. Major home improvements and paying off other debts are the most common reasons people re-mortgage to raise funds, but your lender may ask for evidence when borrowing a large amount.

 

You want to make overpayments

Your circumstances may have changed, you may be in a much higher paid job than you were when you took out the mortgage meaning you are able to make overpayments to your mortgage. Some lenders don’t allow this which means you might want to find a lender that does. Overpaying each month will result in your mortgage being settled a lot earlier and less interest being paid.

 

 

 

When its not a good time to re-mortgaging 

 

There is very little equity in your home

You will often find it very difficult to get a better rate if you want to borrow more than 90% of your property’s value.

 

Your credit rating has dropped since taking out your last mortgage

Lenders have very high criteria and are careful about who they lend to. The FCA (Financial Conduct Authority requires lenders to carefully check that mortgages they offer are affordable to the borrower at both the current rate and at a higher rate too. They will want details of outgoings, spending habits, use of credit facilities and a good history of repayments being made on time. One missed payment could be all it takes to ruin your chances. Make sure you check your credit file regularly, this can be done free.

 

You are already on a great deal

If this is the case you’d be mad to move, but deals don’t last so always remember to review in advance of your deal ending.

 

Early repayment charges

Some lenders have a large early repayment charge if you settle before the mortgage term is up so we would advise checking this out before jumping in to a new deal. However, if you are looking to move to a new mortgage deal with the same lender, they may be willing to waive the charge, but you should check this out first.

 

 

Before doing anything, we would recommend speaking to a professional whole of market mortgage advisor first. They can make sure you have all the facts and can talk through the best options to ensure your final decision is right for you and your family.